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Visualize dynamic hedging

version 1.0 (253 KB) by

(via an interactive GUI)



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Function HEDGEDEMO aims to help students and instructors of finance visualize trading demands of simple static or dynamic value-hedging strategies. In a single-factor setting, 2-asset hedge portfolios are constructed to match, at a point in time, value and delta of the hedged portfolio, consisting of 1-2 assets, one unit of each. (Delta is estimated by shifting the factor path by +/- 0.01). Factor dynamics are described by a Matlab expression or function that defines vector 'X' in terms of vector 'T', where T = StartDate:EndDate. With 'X' defined and evaluated, paths of asset prices are similarly given by Matlab expressions or functions inputting 'X' and 'T'.

Comments and Ratings (3)


Ning (view profile)

Dimitri Shvorob

Ouch :( Thank you for the report, Olivier, I'll look into this. The singularity warning, however, may be legitimate: we find the quantities by solving Aq = b, where A packs prices and deltas, and A can have short rank.

Olivier B.

I got an error when pressing Go, after having generated the time series :
??? Index exceeds matrix dimensions.

Error in ==> hedgedemo>changeHedgeAssetSeries/changeHedgeValueSeries at 411
tradeValue = tradeQuant.*aPrice(3:4,:);

Error in ==> hedgedemo>changeHedgeAssetSeries at 370

Error in ==> hedgedemo>fillFrame41/addFreqPanel/constructHedge at 184

??? Error while evaluating uicontrol Callback

and sometimes
Warning: Matrix is singular, close to singular or badly scaled.
Results may be inaccurate. RCOND = NaN.
> In hedgedemo>changeHedgeAssetSeries/changeHedgeQuantSeries at 379
In hedgedemo>changeHedgeAssetSeries at 369
In hedgedemo>fillFrame41/addFreqPanel/constructHedge at 184
??? Index exceeds matrix dimensions.

It does that, even when using inputs displayed on the jpg example.
Do you have an idea ?




MATLAB Release
MATLAB 7.4 (R2007a)

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